Originally published at HOL

HCS-20 Points: A DeFi Incentives Use Case with Bonzo Finance

Bonzo Finance: The Liquidity Layer of Hedera

Bonzo Finance's mission is to become The Liquidity Layer of the Hedera DeFi ecosystem — unlocking previously dormant liquidity and enabling lending & borrowing capabilities that were previously not possible for retail and institutional users. Bonzo Finance harnesses the full potential of Hedera's EVM equivalence, tooling, and mirror node infrastructure, with a symbiosis that ensures a high efficiency, low cost, and user friendly experience.

Bonzo Finance supports a diverse range of assets, including $HBAR, HTS tokens, and stablecoins, such as $USDC, enabling users to lend and borrow in an overcollateralized fashion across a broad spectrum of the Hedera economy.

The protocol's overcollateralized loan system enables borrowers to access capital by providing collateral into single asset liquidity pools, with loan-to-value (LTV) ratios calibrated to maintain protocol stability. For more sophisticated users and developers, Bonzo Finance offers flash loans – instant, uncollateralized loans that open the door to more complex DeFi operations.

Lenders benefit from competitive and auto-compounding yield on deposited assets, with rates dynamically adjusting based on market demand, ensuring optimal capital efficiency. The user experience is further enhanced by seamless integration with ecosystem wallets, including HashPack, Kabila, and Blade, through WalletConnect, with MetaMask (Snaps) support coming soon, making the protocol accessible to a wide range of users.

Bonzo Points: Utilizing the HCS-20 Standard

Bonzo Finance is revolutionizing incentive models in the Hedera DeFi ecosystem by employing a points program that utilizes the Hashgraph DAO Online's HCS-20 (Hedera Consensus Service) standard. Unlike traditional points systems found across web3 that rely on opaque, centralized databases, this program leverages the Hedera Consensus Service (HCS) to create a fully verifiable, transparent, and auditable reward system.

Inspired by successful point program models like LayerZero’s cross-chain messaging protocol, as well as Kamino and Marginfi, found on the Solana network — Bonzo Finance's approach ensures that all points earned are recorded on-chain and directly tied to accounts on the network, allowing users to independently verify rewards without relying on a centralized authority. This also opens up integration opportunities on the front-end of protocols and applications, such as wallets like HashPack and Kabila.

At the conclusion of each season, accumulated points are converted into $BONZO token rewards, ensuring that active community members who contribute to the protocol's key health metrics — total-value-locked (TVL), stablecoin liquidity, and borrow rates — are appropriately rewarded with governance tokens, to ensure their ability to participate in decision making for the protocol through its DAO governance structure.

Verifiable & Auditable Points

The decentralized architecture of HCS-20 not only incentivizes the lending and borrowing of liquidity, but also aligns with web3 principles of transparency, data ownership, and trustless operations. By utilizing HCS-20 points, Bonzo Finance sets a new standard for fair and open reward systems in DeFi, where users can trust the process itself rather than a central entity, democratizing the concept of loyalty programs across the DeFi industry.

Points Leaderboard

When visiting the points leaderboard on Bonzo Finance, users have the ability to view the points they’ve accumulated, their ranking, and a link to the HashScan explorer, showcasing a verifiable and timestamped entry for points earned.